The Straw That Is Breaking The Camels Back: Trouble in Dubai
by Ritchie Mehta (30 November 2009)
During the last few weeks there has been increasing speculation over the state of Dubai’s once booming economy, which now looks a little worse for wear, to put it mildly. It certainly seems that the ripple effect from the
During the last few weeks there has been increasing speculation over the state of Dubai’s once booming economy, which now looks a little worse for wear to put it mildly. It certainly seems that the ripple effect from the global downturn has reached the shores of the land crowned to be home to the fastest growing city in the world. One of Dubai’s strongest sectors was their construction industry, which as we are all too aware in the UK, was at the root cause of much of our despair. And it looks like it is this sector that is on the verge of breaking the camels back in Dubai.
The signs on the crisis initially emerged when earlier this month the Dubai Government requested creditors of Dubai World, a state-owned firm which sits behind the property boom in Dubai, to hold off for six-months on a $80 billion debt bill. As one can imagine this sent the world financial markets into a spin on speculation that Dubai is having cash flow issues. The first major deadline that Dubai must meet is the 14th of December when $4 billion worth of debt is due to mature in Islamic Bonds issued by Nakheel.
The long and short of it is that it looks likely that Dubai is in need of a huge financial injection but the big question is will anybody come to their rescue? Well, there is certainly talk of the UAE Central Bank putting together a rescue package but there is no guarantee that this will ever be realised. One thing is for sure, the dream certainly looks like it is on hold for Dubai.